NexPoint Residential ((NXRT)) has held its Q4 earnings call. Read on for the main highlights of the call.
The recent earnings call for NexPoint Residential Trust, Inc. presented a mixed sentiment, reflecting both operational strengths and financial challenges. While the company celebrated strategic refinancing and the success of its value-add program, these achievements were overshadowed by a significant net loss, decreased net operating income (NOI), and occupancy challenges in key markets.
Successful Refinancing Activity
NexPoint Residential Trust, Inc. successfully completed refinancing activities that extended the company’s weighted average debt maturity schedule to seven years. This strategic move also reduced the adjusted weighted average interest rate from 3.64% to 2.96%, showcasing the company’s ability to manage its debt effectively and improve financial stability.
Strong Value-Add Program Returns
The company’s value-add program proved fruitful, with 58 full and partial renovations completed in Q4 2024. These upgrades resulted in an average monthly rent premium of $150 and a 19.2% return on investment. Since inception, the program has delivered impressive returns on investments ranging from 20.8% to 64.8%.
Dividend and Core FFO Coverage
In 2024, the dividend was covered 1.47 times by core funds from operations (FFO), with a payout ratio of 68% of core FFO. This reflects a strong dividend strategy, with the dividend having increased by 147.6% since inception, indicating robust shareholder returns.
Decreased Net Operating Income (NOI)
The company reported a net operating income of $38.9 million for Q4 2024, marking a 7.6% decrease compared to $42.2 million in Q4 2023. For the full year, NOI decreased by 6.2% compared to 2023, highlighting ongoing financial pressures.
Net Loss in Q4 2024
NexPoint Residential reported a net loss of $26.9 million, or $1.06 per diluted share, for Q4 2024. This is a stark contrast to the net income of $18.4 million, or $0.70 per diluted share, reported in Q4 2023, underscoring significant financial challenges.
Challenging Same-Store NOI Growth
The same-store NOI for Q4 2024 decreased by 40 basis points. Although full-year same-store revenue increased by 2%, same-store NOI only improved by 90 basis points, indicating challenges in maintaining consistent growth.
Occupancy Challenges in Raleigh-Durham
The Raleigh-Durham market faced a 290 basis point decrease in occupancy, attributed to pressures in the Morrisville submarket and personnel changes. This highlights regional challenges affecting the company’s overall performance.
Forward-Looking Guidance
Looking ahead to 2025, NexPoint Residential Trust, Inc. provided guidance projecting core FFO per diluted share to range from $2.56 to $2.83, with a midpoint of $2.70. They anticipate same-store revenue to increase by up to 1.3% and same-store expenses to rise by 2.4% to 4.9%. Same-store NOI is expected to range from a 50 basis point increase to a 3.5% decrease. The company plans to complete 425 full interior upgrades, aiming for a $269 average monthly rent premium, and highlighted strong liquidity with no significant debt maturities until 2027.
In summary, the earnings call for NexPoint Residential Trust, Inc. reflected a mixed financial performance, with strategic refinancing and value-add program successes being overshadowed by a significant net loss and occupancy challenges. Looking forward, the company has set ambitious goals for 2025, focusing on strategic enhancements and maintaining strong liquidity to drive growth.